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Debt Collection Agency

No matter what business you are in and no matter what the size of your business or how thorough your credit checks and credit control procedures are, there will be at least very occasionally times when it is simply not possible to recover a debt. When your own attempts to collect an outstanding account have become exhausted and you have decided to seek help from a third party your first thought may be to find a debt collection agency. While the industry is now very well regulated and there are many established companies with very good success rates, there are still, sadly, some agencies that will try to extract as much commission as possible or who are simply not very effective. Take some time to find a reputable firm that offers a realistic chance of getting paid at a fair cost.

So, where should you look and what should you look out for?

For most people now the internet and a search engine is where their search begins and this is a good way to quickly find what you are looking for. If you search for debt recovery agency you will find that the first few pages contain listings for most of the largest and well recognised agencies in the UK, it can take years to appear high up in search results so you can be fairly assured that companies on the first few pages have been around for quite a while. A note of caution however, this does not apply to the paid ads that appear at the top of each page, while many of the large agencies use this form of advertising, an ad appearing at the very top of the page could just as easily be a completely new company with no experience operating from a bedroom.

Never instruct the first debt collection agency you speak with, draw up a short list and speak with 3 – 5 different companies. We will look at rates and the types of fees and charges later, firstly ensure the company is reputable and has experience. Find out if they are members of the Credit Services Association the collection industries trade association, you can do this easily by visiting the CSA website, you could even start you search here. Ask for references and if you can speak with existing clients, if the agency is any good they will have plenty of satisfied clients who should be happy to speak with you. Once your satisfied that the companies you are considering instructing are bona fide and experienced, its time to look at what they intend to charge you and how they will do this.

Debt Collection Agency fees and charges

Most agencies with an established track record will offer their services on a no win no fee basis. Beware of any firm that requests upfront payment or asks for any form of payment prior to successfully collecting your debt. You should also be especially wary if you are asked to pay a membership fee, this type of arrangement has become popular amongst a handful of unscrupulous operations in recent years. The fees requested for lifetime membership can range from £250 to £1,000 and once paid there is little incentive for the company to even attempt collection as they have effectively already been paid. This type of operation signing up just 4 new members a week at £500 would make a profit of over £100,000 while not collecting a single debt.

We have established that you should not consider instructing any debt collection agency that requests any form of payment before recovering your money, now let’s look at rates. Commission rates can vary from as low as 1% to as high as 30% and will very often be based on the age and size of the debt to be recovered. Generally the older a debt the more difficult and time consuming it will be to recover and the commission rate percentage will be higher. Considering the fact that it can be just as difficult and take just as long to recover a debt of £1,000 as a debt of £10,000, the commission rate percentage should be much lower for high value debts. As a rough guide you can expect to be charged the following commission rates for recovering debts up to 90 days old:

£0.00 – £999.00 = 15%

£1,000.00 – £4999.00 = 10%

£5,000.00 – £9,999.00 = 7.5%

£10,000 and over = 5%

The rates can increase by as much as 50 percent if the debt is over 90 days old or is disputed or is owed by an overseas based company or individual.

As with anything choosing a company to work with based on solely the cheapest rate available can often backfire and cost you more in the long run. Commission rates should be just one of many factors considered before instructing a debt collection agency.

No cost Debt Collection under late payment legislation

A small number of specialist debt recovery practitioners, such as Advocate, have adapted and developed their procedures to operate in accordance with late payment legislation enabling them to offer free to the creditor debt collection. Current legislation allows late payment charges to be claimed from the debtor to pay for the recovery costs incurred by a third party in collecting commercial debts. Therefore the creditor receives 100% of the principal debt owed while the debtor is legally responsible for the payment of the recovery and collection charges.